- The SEC asks crypto issuers to explain how they run their business and manage blockchain networks clearly.
- Companies must share details about liquidity risks and the technical features of their crypto assets.
- The Crypto Task Force supports the new guidance as full crypto regulations are still in progress.
The U.S. Securities and Exchange Commission (SEC) has released detailed disclosure guidance aimed at issuers of crypto assets classified as securities. The SEC’s Division of Corporation Finance developed this guidance to improve clarity and transparency in the crypto market.
Issuers are instructed to describe their business operations in straightforward language, covering how they generate revenue and the timelines for network development. They must also explain transaction validation processes and network governance structures. This approach is designed to help investors understand how these businesses operate and manage their assets.
Focus on Risk and Asset Description
The SEC insists that issuers must reveal every significant risk affecting their crypto assets. Organizations must explain all related risks that affect their business operations, asset safety, market fluctuations, and liquidity constraints. The guidance calls for a “materially complete description” of the crypto asset, including details about holder rights and technical specifications.
These technical details should cover the asset’s divisibility and any smart contract functions. By providing these disclosures, issuers will offer investors a clearer view of potential risks and operational complexities.
Detailed Financial Statements Expected
In addition to business and risk disclosures, the SEC expects issuers to present accurate financial statements. These must include exhibits and details about significant employees involved in the operations. According to the Division of Corporation Finance, the interim policy functions as a short-term solution pending official regulations.
This announcement came shortly after the Senate confirmed Paul Atkins to lead the SEC as chair while the agency maintains active oversight of cryptocurrency markets. The guidance extends to all material aspects of the issuer’s operations to ensure complete transparency for market participants.
Crypto Task Force Endorses Guidance
The Crypto Task Force, led by Commissioner Hester Pierce, supports the new disclosure guidelines issued by the SEC. This task force is working toward establishing formal regulations for crypto securities issuers. Until these regulations are complete, the current guidance provides issuers with clear direction.
The Securities and Exchange Commission (SEC) has continuously defined its regulatory position about different crypto assets during the year. The SEC declared that payment-oriented dollar-backed stablecoins do not fall under the securities regulatory scope.
The SEC also made it clear that proof-of-work mining activities and memecoins do not require compliance with securities regulations. The SEC continues its work of establishing crypto market regulations while protecting investor safety through these regulatory actions.
